Verallia : Transcript des Q&As de la Journée Investisseurs 2021

Q&As

transcription

Thursday, 7th October 2021

Transcript produced by

Verallia Capital Markets Day 2021

Thursday, 7th October 2021

Verallia Capital Markets Day 2021

Q&As

Alexandra Baubigeat‐Boucheron: We have the first question for Romain from Paco

1. Could you please explain if the 9 plants that work 100% with 0 emission include also the melting process. How do you do it?

Romain Barral: Ok so maybe I will clarify a little bit that point. Those nine plants are in fact having a specific contract to get green electricity. So some of the electrical part of the energy we consume in those plants is carbon‐free. And as a reminder the electricity we today in our plants represents between 15% and 20% of the overall energy we consume. So a portion of it is used in the melting energy and a portion of it is used on the non‐melting. But overall this green or carbon‐free energy power is only for electricity so roughly 15% to 20% of those plants.

Alexandra Baubigeat‐Boucheron: Thank you Romain. Another question

1. How 'Fit to 55' could impact in volumes given the import tariff to glass from outside Europe?

Romain Barral: First of all, we don't have all the details around some of the elements for 'Fit to 55' and in particular the carbon border adjustment mechanism which if it's implemented and if it's implemented in a fair way in fact should have a limited impact on the import because that would allow us in Europe to play on a level ground when it comes to CO2 cost.

Alexandra Baubigeat‐Boucheron: Thank you. Last question for you Romain:

1. What steps can you take to secure more cullet supply? I am considering that many players are trying to secure more cullet... other than just paying more for cullet, can Verallia differentiate by vertical integration or similar here?

Romain Barral: As I explained in the presentation and you've seen already some examples, there are two ways for us to continue to increase the cullet that we can use in our plants. The first one is to work with current cullet suppliers and to work on the long term so through long term agreement or joint venture as we did in Germany with Remondis. That's the first item. The second one, especially on the low cullet countries, is that we will start to work more on the collection, being actively and directly involved into the collection, working with people who are collecting but also local administration to be able to do that. You've seen the first example in the presentation on Brazil by Quintin.

Alexandra Baubigeat‐Boucheron: It was the last question for Romain. A question for Olivier:

1. What are you expecting from the competitive agreement? Where are you today on that?

Olivier Rousseau: The transformation plan is behind us and we had a majority of our employees basically agreeing to our competitiveness agreement. So the heavy lifting is behind us and today we are clearly focused on improving our industrial performance in order to

2

Verallia Capital Markets Day 2021

Thursday, 7th October 2021

improve our competitiveness and our financial performance. So the goal for me is very simple: I want France to reach the level of other Verallia countries in Europe. That's what we are after.

Alexandra Baubigeat‐Boucheron: Thank you Olivier. A question for Marco:

1. Can you explain the competitive landscape and if there is any acquisition opportunity in Italy?

Marco Ravasi: The particularity of Italy is that it's a very fragmented market. You have to keep in mind that it's the only case in Europe where you have 10 players, 10 glass producers and anyway we have also to say is that it's also quite good growing market because from 2014 to 2019, before COVID, it was a 3.5% CAGR. That was bringing to lack of glass but that's still an issue anyway. It's the reason because in the future landscape in the coming years there are three new installations expected to be made by three different players in the plant. And at the moment is also growing the import. The import is roughly around 20% in the plant. So the fact that everyone is looking to put capacity because the market is very dynamic, fragmented but very dynamic, is also the answer to, unfortunately, the second point because we are looking around for possibility to make acquisition but the situation is quite good for all the players because the market is good. So we will have to wait probably for another time. We are looking around but this is not the right moment to make acquisitions in Italy.

Michel Giannuzzi: This is the reason why Italian teams are proposed to invest in a brown field project that will start in 2024. Since we cannot find decent acquisitions, we will grow organically faster and this project will enable us to capture the growth of the market.

Alexandra Baubigeat‐Boucheron: Thank you. A question for Paolo:

1. Can you give us more examples on what you are doing to promote glass towards end customers?

Paolo Pinto: As I have presented on slide 64, what we do is through glass national association in Portugal and in Spain, and with the help of FEVE Friends of Glass, is to use platforms like YouTube, Instagram and Tik Tok and using info insert to engage end consumers to the qualities of glass. In the right side of the slide for instance you have a popular band that made a song highlighting the qualities of the glass and using bottles as instruments. So this is one of the things that we do in the region to promote glass and to reach end consumers.

Alexandra Baubigeat‐Boucheron: Thank you. The next questions will be for Northern and Eastern Europe. A question regarding returnable glass bottles:

1. When a high volume returnable glass bottles system is put in place on a dedicated product, say for mineral water for example, is Verallia selected as exclusive producer or can customers source standardized products from different glass producers? And if exclusive, how is the glass producer selected?

Hugues Denissel: We have different models. It really depends on the customer and on the situation. We are flexible to the segment we need to serve. But if you remember the slide on the returnable, there was one little picture about 2 bottles in the retro mode. This is a typical of an example where we are the exclusive producer of a bottle that go to several customers

3

Verallia Capital Markets Day 2021

Thursday, 7th October 2021

in the beer market. And then you go a little bit to the right of this slide, you find the 4 breweries that redesigned a pool of bottles, not only a pool but a family of bottles. In this case we will be one of the suppliers among others. What is important and was the key to success is to be early in the process, in the cooperation and the collaboration with the customer in the design of these new articles.

Alexandra Baubigeat‐Boucheron: Thank you very much Hugues. A question for Quintin:

1. Why is EBITDA margin in Latam way above the rest of the Group? Good Question.

Quintin Testa Dominguez: That's right. Despite the local situation and the specificities of our region I believe the implementation of the strategy is done with a very disciplined manner. First of all, we have a very strong and dedicated team supported by the global activities also. We are well aligned with the market working with local customers but also with global customers with a huge intimacy to try to keep always a very positive spread. And the last but not the least, our operations are achieving the level of excellence. First of all working on quality, on safety, improving the efficiency, the service rate and last point, but an important one, is we are reducing our cash cost through the Productivity Action Plan 3% year on year.

Alexandra Baubigeat‐Boucheron: Thank you. I'm sorry I'm receiving other questions live, so I have another question on Northern and Eastern Europe.

1. What is achievable in Northern and Eastern Europe in terms of margin given the less attractive mix i.e., less wines etc?

It was actually a question from Fraser who was also asking if you could you give color on the target margins per region implied by the guidance.

Hugues Denissel: In fact in Northern Europe, there is very interesting segments. It may not be driven always by the nicest design that we see in other regions such as France but there is also differentiation on performance through the functions. Very industrial customers they want very high performance, and they are very selective on the performance of their suppliers. That's also a differentiation and that's also a value driver. We also know that the diversity of segments is interesting. Wine is one, sparkling is another segment. There is a lot of pockets of value in the region and we're driving the strategy on each of the segment we want to develop.

Alexandra Baubigeat‐Boucheron: Thanks Hugues. Regarding the margin by region I think Michel you can answer that.

Michel Giannuzzi: We don't give specific targets by region. As you can see from the segments reporting, NE Europe is also a region that has probably a lot of potential for further improvements to close the gap with for example SW Europe and the rest of the Group. Most improvements will come, as Nathalie explained, from three pillars. One pillar will be the growth and a very selective growth in the most value added segments as Hugues has just said. The second pillar will be positive spread again in the segments especially in the countries where the currency can change a lot like Ukraine or Russia. We always aim at providing the positive spread year on year. The third pillar which is applicable to all the divisions is clearly the PAP and here again we have great opportunities in this region to improve the performance

4

Verallia Capital Markets Day 2021

Thursday, 7th October 2021

of our plants and to reduce the cash cost through the Performance Action Plans. So, it's not very different from the rest of the Group. This is probably a bit more upside in this region than of course in Latin America which is already the star in our company in terms of performance on all matters.

Alexandra Baubigeat‐Boucheron: Thank you very much to Hugues, Dirk and Quintin. I think that now we'll move on to the Group and the financial questions for Michel and Nathalie. So if I may start with the questions around pricing:

1. When talking about 4‐6% annual growth, is management not concerned that it will have to 'give back' some of the large price increases needed in 2022? i.e. what gives you confidence that prices can be kept at that level?

Michel Giannuzzi: We are not so much focusing on price than we are focusing on spread which is very important. Spread is the difference between price increase and cost increase. And our goal, clearly explained by Nathalie, is to every year achieve a positive spread. I remind you that this year in many countries in Europe the prices have been reduced but we have been able to reduce our prices less than the deflation of cost we've seen in Europe. So altogether if you remember this year in the first semester when we presented our results to you, we were talking about a flat price in average in Europe with some countries or some products segments a little increase others little decrease, overall flat, and what is important is not really the price increase or the price decrease, what is important is the difference between pricing and cost. Going forward, and we know very well that today it's a really hot topic if I can say so in terms of energy cost inflation, we're going to have to go for a very high pricing increases in the coming days, weeks and months with our customers but if you look at the forward prices of electricity or gas for example, you see that there is a huge hump next year in 2022 but prices start to go down again in 2023. Which means that of course if we have a decrease of prices of energy in 2023 and 2024 we will reduce our prices in order to give back to the customers the deflation of cost that we will see in that year. Of course what we want and what we need to achieve is to always end up with a positive spread. So, price is for us less an issue than spread. What we want is that in the three pillars that Nathalie has explained to you that will make our business model work and deliver the results that we've been delivering we need to have a positive spread whether the price is positive or negative which means decreased prices.

Alexandra Baubigeat‐Boucheron: Thank you Michel. A question from Jamie:

1. Hi team Verallia, can you please break out pricing assumptions by region in this guidance. Thanks

Michel Giannuzzi: Same thing, I mean basically you know very well it has not changed this year. We have basically two big regions, we have Europe 90% of our sales, then separate from Latin America which is 10% of our sales. In Latin America, the prices are very specific to the countries. Countries like Argentina are in hyperinflation, we had a 45% inflation last year in Argentina and we increased our prices in Argentina more than 45% again in order to end up with a positive spread. Inflation is a bit less in Chile and in Brazil but these countries in any case are used to negotiate prices several times a year as when needed. Europe is a bit different. I remind you that in Europe usually prices are fixed once a year, negotiated once a

5